WASHINGTON (Reuters) - The Federal Reserve could intervene in financial markets to smooth out volatility sparked by political wrangling over the federal government's debt ceiling, according to a former congressional aide who cited central bank documents.
J.W. Verret, the former chief economist and senior counsel for the Financial Services Committee of the U.S. House of Representatives, said on Monday he was allowed to examine parts of the New York Federal Reserve's debt ceiling contingency plans early last year.
"They believe, and they have stated in these documents, that they could use open market operations to prevent any volatility in Treasury markets in the event the debt ceiling wasn't lifted," Verret told Reuters.
(Reporting by Sarah N. Lynch and Jason Lange; Editing by Doina Chiacu)
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